nep-sea New Economics Papers
on South East Asia
Issue of 2014‒12‒24
28 papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Importing high food prices by exporting : rice prices in Lao PDR By Durevall, Dick; van der Weide, Roy
  2. Cash Management Reform in Indonesia : Making the State Money Work Harder By Indonesian Ministry of Finance; World Bank Group
  3. Modern Services Export Performances among Emerging and Developed Asian Economies By Nasir, Shahbaz; Kalirajan, Kaliappa
  4. Business Cycle Synchronization in Asia: The Role of Financial and Trade Linkages By Dai, Yuwen
  5. Hometown Investment Trust Funds: An Analysis of Credit Risk By Yoshino, Naoyuki; Taghizadeh-Hesary, Farhad
  6. Unplugging Institutional Bottlenecks to Restore Growth: A Policy Discussion Paper Prepared for the 2013 Vietnam Executive Leadership Program (VELP) By Vu Thanh Tu Anh; David Dapice; Huynh The Du; Pham Duy Nghia; Dwight Perkins; Nguyen Xuan Thanh; Do Thien Anh Tuan; Ben Wilkinson
  7. Creative economy policy in developing countries: the case of Indonesia By Fikri Zul Fahmi
  8. Economic development in Sarawak, Malaysia: An overview By Furuoka, Fumitaka
  9. Does regulation improve bank peroformance in South and East Asia? By Mamatzakis, Emmanuel; Hu, Wentao
  10. Philippines’ bilateral labour arrangements on health-care professional migration in search of meaning By Makulec, Agnieszka
  11. Remittances, informal loans, and assets as risk-coping mechanisms: Evidence from agricultural households in rural Philippines By Marjorie C. Pajaron
  12. Public Health Expenditures, Income and Health Outcomes in the Philippines By Deluna, Roperto Jr; Peralta, Tiffany Faith
  13. The Cost of Misguided Urbanization: The Case of Informal Settlements in Butuan City, Philippines By Navarro, Ma. Kresna; Almaden, Catherine Roween
  14. The Long-run Relationship among World Oil Price, Exchange Rate and Inflation in the Philippines By Deluna, Roperto Jr
  15. A Dynamic Rural-Urban-Natural Environment Interactive Spatial Model of Palangkaraya City in Indonesia By Yuzuru Miyata; Hiroyuki Shibusawa
  16. Regulating the negative externalities of enterprise cluster innovations : Lessons from Vietnam By Voeten, J.; Naudé, Wim
  17. The Impact of Disability Benefits on Labor Supply: Evidence for the VA’s Disability Compensation Program By David Autor; Mark Duggan; Kyle Greenberg; David Lyle
  18. Chinese National Income, ca. 1661-1933 By Shi Zhihong; Xuyi; Ni Yuping; Bas van Leeuwen
  19. A New Hedonic Regression for Real Estate Prices Applied to the Singapore Residential Market By Liang Jiang; Peter C.B. Phillips; Jun Yu
  20. Choosing Survival: Finding a Way to Overcome Current Economic and Political Quagmires in Myanmar By David Dapice; Tom Vallely
  21. China and Yunnan Economic Relations with Myanmar and the Kachin State: Powering the Peace Process By David Dapice
  22. Preschools and early childhood development in a second best world: Evidence from a scaled-up experiment in Cambodia By Bouguen, Adrien; Filmer, Deon; Macours, Karen; Naudeau, Sophie
  23. Ideals should not be too ideal: Identity and public good contribution By Fuhai HONG
  24. The political settlement and economic growth in Cambodia By Tim Kelsall; Heng Seiha
  25. A Fatal Distraction from Federalism - Religious Conflict in Rakhine By David Dapice
  26. Restricted Likelihood Ratio Tests in Predictive Regression By Peter C.B. Phillips; Ye Chen
  27. A Class of Symmetric and Quadratic Utility Functions Generating Giffen Demand By Massimiliano Landi
  28. Diffusion by imitation: the importance of targeting agents By Nikolas Tsakas

  1. By: Durevall, Dick; van der Weide, Roy
    Abstract: This paper shows how a developing country, Lao PDR, imports high glutinous rice prices by exporting its staple food to neighboring countries, Vietnam and Thailand. Lao PDR has extensive export controls on rice, generating a sizable difference between domestic and international prices. Controls are relaxed after good harvests, leading to a surge in exports early in the season and rapidly rising prices later in the year. There is thus a strong case for removal of trade restrictions since they give rise to price spikes, keep the long-term price of glutinous rice low, and thereby hinder increases in income from agriculture. Although this is a case study of Lao PDR, the findings may equally apply to other developing countries that export their staple food.
    Keywords: Markets and Market Access,Food&Beverage Industry,Emerging Markets,Access to Markets,E-Business
    Date: 2014–11–01
  2. By: Indonesian Ministry of Finance; World Bank Group
    Keywords: Finance and Financial Sector Development - Access to Finance Urban Development - Urban Economics Finance and Financial Sector Development - Debt Markets Public and Municipal Finance Public Sector Economics Public Sector Development
    Date: 2014–10
  3. By: Nasir, Shahbaz (Asian Development Bank); Kalirajan, Kaliappa (Crawford School of Public Policy)
    Abstract: Advancements in information and communications technologies (ICTs) have expanded the possibilities for trade in modern services and many Asian emerging and developed economies are increasingly participating in these new trade activities. This study examines the export performances of emerging and developed Asian economies in selected modern services—computer and information, business and professional, and telecommunications—using a stochastic frontier gravity model. Estimation results show that the performances of emerging economies in South Asia and the Association of Southeast Asian Nations (ASEAN), in terms of realization of export potential, are considerably weaker than those of developed economies in North America and Europe. The results also show that the number of graduates and the quality of ICT infrastructure in emerging countries are among the key factors in realizing services export potential. These findings suggest that emerging economies need to remove "behind-the-border" constraints and adopt advanced technologies in order to catch up with high-performing developed countries.
    Keywords: Service exports; stochastic frontier gravity model; Asia; North America; Europe
    JEL: C24 F14
    Date: 2014–11–01
  4. By: Dai, Yuwen (Asia–Pacific Economic Cooperation)
    Abstract: In this research project, we attempt to examine the behavior of business cycles in Asia in order to deepen our understanding of and expand research on this topic. Given the importance of the People’s Republic of China, Japan, and the United States in the region economy, we use these three economies as our “reference countries” to study the synchronization of their business cycles with other Asian economies of interest. In particular, we investigate the potential determinants underlying the synchronization of their business cycles, including trade linkages, financial linkages, and policy similarities. From our panel data analysis, we find empirical evidence of the impacts of trade channels, financial channels, and policy channels in determining the degree of their business cycle synchronization.
    Keywords: business cycle synchronization; macro interdependence; trade integration; financial integration; interest rate; fiscal balance; policy coordination; Asia; NIE-4; ASEAN-4; PRC; Japan; US; panel data analysis
    JEL: E30 E32 F00 F15 F36 F42 F44
    Date: 2014–10–01
  5. By: Yoshino, Naoyuki (Asian Development Bank Institute); Taghizadeh-Hesary, Farhad (Asian Development Bank Institute)
    Abstract: In Asia, small and medium-sized enterprises (SMEs) account for a major share of employment and dominate the economy. Asian economies are often characterized as having bank-dominated financial systems and underdeveloped capital markets, in particular venture capital markets. Hence, looking for new methods of financing for SMEs is crucial. Hometown investment trust funds (HIT) are a new form of financial intermediation that has now been adopted as a national strategy in Japan. In this paper, we explain the importance of SMEs in Asia and describe about HITs. We then provide a scheme for the credit rating of SMEs by employing two statistical analysis techniques, principal components analysis and cluster analysis, and applying various financial variables to 1,363 SMEs in Asia. Adoption of this comprehensive and efficient method would enable banks to group SME customers based on financial health, adjust interest rates on loans, and set lending ceilings for each group. Moreover, this method is applicable to HITs around the world.
    Keywords: smes; credit risk; hometown investment trust funds; venture capital markets; asian capital markets
    JEL: G21 G24 G28
    Date: 2014–12–03
  6. By: Vu Thanh Tu Anh; David Dapice; Huynh The Du; Pham Duy Nghia; Dwight Perkins; Nguyen Xuan Thanh; Do Thien Anh Tuan; Ben Wilkinson
    Abstract: This paper was prepared for the fourth annual Vietnam Executive Leadership Program (VELP), held at the Harvard Kennedy School from August 26 to 30, 2013. This paper aimed to provide participants, including Vietnamese government officials, scholars, and corporate executives, with a concise assessment of some of the key public policy challenges confronting Vietnam today. This paper is by no means comprehensive; it is not possible to offer an exhaustive analysis of every policy area in a brief study. In selecting which issues to address, the authors were guided by the priorities articulated by the Vietnamese government in policy statements promulgated over the past year. By design, the paper was delivered as a work in progress, which the authors encouraged the participants to challenge and strengthen through rigorous debate over the five days of VELP. It is hoped that the paper also will serve as a catalyst for informed discussion and debate among the larger policy community in Vietnam.
  7. By: Fikri Zul Fahmi
    Abstract: This paper elaborates on how the global discourse on creative economy is interpreted in developing countries. We accomplish this by examining how the discourse has been institutionalized in several Indonesian cities. As an effect of decentralization, localities attempt to become a winner among other regions. The creative economy policy is thus pragmatically adopted to boost economic growth. Often these localities do not consider their local contexts before applying this policy. The creative economy in Indonesia is different in nature as interpreted in a different way. Traditional cultural industries are imposed to be included as creative industries, but they hardly perform new knowledge learning and innovation. This policy is implemented also to preserve traditional culture values, while efforts in improving knowledge and innovative capacity are taken for granted. The strong attachment to traditions could be the barrier to developing recent design and innovative products.
    JEL: D02 O43 O53 R58 Z18
    Date: 2014–11
  8. By: Furuoka, Fumitaka
    Abstract: The state of Sarawak is situated on Borneo Island in East Malaysia. It is the largest state in Malaysia covering an area of approximately 124 thousand square kilometres. Sarawak’s population is approximately 2.07 million people, which makes it the fourth most populous state in the country. There are several distinguished characteristics of the economic development process in Sarawak which highlight the contrast in economic development in Sarawak and the rest of Malaysia. On the whole, the Malaysian economy transformed itself from a primary commodity-based economy to a manufacturing and industry-based one. Until the 1970s, Malaysia was predominantly an exporter of rubber and tin. However, the country overcame the colonial heritage that shaped its economic structure based on primary commodity dependency and became an exporter of manufactured goods. Sarawak, on the other hand, did not follow suit and its economy remains being driven by export of primary commodities, such as liquefied natural gas (LNG) and crude petroleum.
    Keywords: Economic development, Sarawak, Malaysia
    JEL: O53 R11
    Date: 2014
  9. By: Mamatzakis, Emmanuel; Hu, Wentao
    Abstract: In this paper, we utilize stochastic frontier analysis to estimate the impact of the regulations and institutions on bank efficiency through analyzing 389 savings and commercial banks in 11 Asian countries during the period 2000-2012. We find that activity restriction, capital requirement, official supervisory and private monitoring have a positive impact on bank performance. Furthermore, a wholesome institutional environment with powerful government, low corruption and strict law can enhance bank inefficiency. Our results suggest that banking regulations can improve bank performance with high quality of the institutional environment.
    Keywords: Bank efficiency, regulations, institutions.
    JEL: G0 G00 G1 G18
    Date: 2014–11–14
  10. By: Makulec, Agnieszka
    Abstract: The report aimed to study how the three roles of BLAs -- facilitation of recruitment, protection of migrants’ rights and mitigating of negative consequences of migration for sending countries -- are secured and implemented in the BLAs on health-care professionals’ migration between one of the major health professionals’ exporting countries, the Philippines.
    Keywords: 1, 2
    Date: 2014
  11. By: Marjorie C. Pajaron (School of Economics, University of the Philippines Diliman)
    Abstract: This paper investigates whether agricultural households in rural Philippines insure their consumption and whether they use remittances, informal loans, or assets as ex post risk-coping mechanisms. Since these households have limited access to formal insurance and credit markets, any shocks to their volatile income can have substantial impacts. Using panel data and rainfall shocks as the instrumental variable for income shocks, this paper finds evidence that households depend on their networks of family and friends to partially insure their consumption. 2SLS and OLS estimates show that approximately 27 percent of consumption is insured. International remittances from migrant members replace about 11 percent of income decline while domestic transfers replace about 14 percent. Informal loans, however, decrease as rainfall shocks increase. Borrowers and lenders may be experiencing similar shocks, which would reduce the effectiveness of local risk-sharing arrangements.
    Keywords: Risk-coping, Remittance, Informal loan, Consumption insurance, Rainfall shocks, Philippines
    JEL: O12 Q12 D81 D12 F22 F24
    Date: 2014–12
  12. By: Deluna, Roperto Jr; Peralta, Tiffany Faith
    Abstract: This paper studied the relationship among public health expenditures, income and health outcomes in the Philippines. Infant mortality rate, under five mortality rate and life expectancy were used as proxy for health outcomes. Specifically, this paper presented the profile of government health expenditures, income and health outcomes from 1981 to 2010. The study used Vector Autoregressive Analysis and Granger Causality test to determine the direction of relationship of the variables. Results revealed that health expenditure per capita followed an overall increasing trend with an average growth rate of 6.49% and GDP per capita with an average growth rate of 11% from 1981 to 2010. These correspond to the reduction of infant mortality rate by 1.64% on average, under five mortality by 1.76% and the increase in life expectancy with an average growth of 0.17% from 1981 to 2010. However, VAR results revealed that the past values of public health expenditure has no effect on under-five mortality rates but affects infant mortality rate. This may suggest that the past and present level of health expenditure is not sufficient enough to affect under five mortality rate but is effective enough on alleviating infant mortality rate. Conversely, past and present values of GDP per capita is not sufficient enough to affect infant mortality rate but affects under five mortality rate in the Philippines. VAR estimation also revealed that both health expenditure and GDP per capita has a positive and significant effect on life expectancy. Thus, to improve life expectancy and to reduce child mortality rates in line with the Millennium Development Goals, it requires effective and sufficient health expenditure and a sustainable economic growth.
    Keywords: VAR, Health Outcomes, Health Expenditures, Income, MDG
    JEL: C32 H5 H51 I15
    Date: 2014–04
  13. By: Navarro, Ma. Kresna; Almaden, Catherine Roween
    Abstract: The informal settlements in Butuan City, Philippines pose the intractable problem of housing and providing services for the urban poor. They exact tremendous costs to government infrastructure projects and the city as a whole. In this study, these costs are accounted for, particularly the costs the government will incur to compensate them for being displaced in the implementation of public infrastructure project. Primary data were collected through inventory of losses (IOL), socio-economic survey (SES) and the replacement cost surveys. Secondary data were obtained through key informant interviews with different stakeholders. The paper quantifies the costs of compensating them thru replacement of their affected resources and providing resettlement. It also establishes different types of compensation to secure just terms for all parties. It presents a rich picture of how the informal settlers affect urban environment and the monetary and operational challenges they pose to the government and the society at large.
    Keywords: Informal Settlements, Social Cost, Urbanization
    JEL: O17 O53 Q5 Q51
    Date: 2014–09–01
  14. By: Deluna, Roperto Jr
    Abstract: This study was conducted to determine the long-run relationship among world oil price (WOP), Philippine inflation rate (IR) and exchange rate (ER). Results of the Augmented Dickey Fuller (ADF) tests of the variables revealed that all three series are not stationary in the process and were subjected to first differencing. ADF further revealed that the three series are integrated of order 1 or I(1). Therefore, vector error correction model (VECM) was used to examine the relationship of the three variables. VECM revealed a positive long-run relationship between IR and WOP, and IR and ER. A unit increase of the world oil price will increase Philippine inflation by 0.31%. While, a unit increase in exchange rate (PhP: USD) will increase inflation rate by 0.42%. In terms of ER, results revealed that an increase in the past values of WOP will increase ER. However, ER is not affected by the past values of IR. Result of the granger causality shows that all of the other variables jointly granger cause and individually granger cause inflation rate. Changes in ER cannot be predicted by joint and individual changes in the previous periods of WOP and IR.
    Keywords: VECM, inflation, world oil price, exchange rate
    JEL: C3 C32 E1 E10 E31
    Date: 2014–08–01
  15. By: Yuzuru Miyata; Hiroyuki Shibusawa
    Abstract: Permana and Miyata (2009) showed a partial equilibrium urban economic model to explain the existence of illegal settlements in flood prone areas in Palangkaraya City in Central Kalimantan Province, introducing the expected damage rate on household asset. Applying this new idea, one can derive the conclusion where the bid rents by low income households get higher than those by high income households in flood prone areas. This is the contrary conclusion being highlighted as compared with that in the traditional urban economics. Following this paper, Permana and Miyata (2009) extended the partial equilibrium model into a general equilibrium model. And then Permana and Miyata (2009) developed a two dimensional city model applying MiyataÂfs achievement (2009). However the study region, Palangkaraya City and its surrounding area, shows a complicated interaction between natural environment and human activities. Therefore this article aims at developing a rural and urban economic model with natural environment considerably extending our previous literature.
    Keywords: flood damage; natural environment; urban economics;
    JEL: O18 Q56 R13
    Date: 2014–11
  16. By: Voeten, J. (Tilburg University, School of Economics and Management); Naudé, Wim
    Abstract: Innovation has been acknowledged as contributing to development, in particularly inclusive innovations that involve and benefit poorer groups in developing countries. However, such innovation may have negative externalities. Most often external regulation is required to reduce these effects. However, it is often not enough, and in many developing countries the required institutional context is not present to enable external regulation. Hence a case may be made for internal regulation of inclusive innovation. Helping to fill the gap in our knowledge on internal regulation of innovation externalities in developing countries, we explore four cases of innovation in informally-organised small producers’ clusters Vietnam. From this we propose a model of internal regulation as a societal process.
    Date: 2014
  17. By: David Autor (Massachusetts Institute of Technology and The National Bureau of Economic Research); Mark Duggan (Stanford University and The National Bureau of Economic Research); Kyle Greenberg (Massachusetts Institute of Technology and United States Military Academy); David Lyle (United States Military Academy)
    Abstract: We analyze the labor market effects of the U.S. Department of Veterans Affairs’ Disability Compensation (DC) program. The largely unstudied DC program currently provides income and health insurance to approximately four million veterans of military service who have service-connected disabilities. We study a unique policy change, the 2001 Agent Orange decision, which expanded eligibility for DC benefits to a broader set of covered conditions — in particular, type II diabetes — to Vietnam veterans who had served in-theater (with ‘Boots on the Ground’ or BOG). Notably, the Agent Orange policy excluded Vietnam era veterans who did not serve in-theatre (‘Not on Ground’ or NOG), thus allowing us to assess the causal effects of DC eligibility by contrasting the outcomes of BOG and NOG veterans. Our results indicate that the policy-induced increase in DC enrollment reduced labor force participation by 18 percentage points among BOG veterans who enrolled in the DC program as a result of the policy change. We also find evidence of program spillovers, with DC recipients significantly more likely to qualify for Social Security Disability Insurance benefits.
    Date: 2014–11
  18. By: Shi Zhihong; Xuyi; Ni Yuping; Bas van Leeuwen
    Abstract: This paper pulls together many primary and secondary sources to arrive at consistent estimates of national income for china between the 17th and 20th centuries. We find, in line with much of the literature, that GDP per capita declined between the mid-17th and 19th centuries. This trend reversed during the 19th century, mainly due to a shift into services and, for the late 19th century onwards, also in industry. Since these sectors exhibited higher labour productivity, this fostered economic growth. This pattern of decreasing share of services and industry from the 17th century and increasing shares in the 19th century is common in many Asian countries except Japan. The reasons for this development, however, are unclear. The standard ultimate factors of growth such as institutions (low marriage age for women, exclusive society) and geography apply to almost all Asian countries. Hence, more research is necessary.
    Keywords: GDP, agriculture, industry, services, growth, China, economic history
    Date: 2014–12
  19. By: Liang Jiang (Singapore Management University); Peter C.B. Phillips (Cowles Foundation, Yale University); Jun Yu (Singapore Management University)
    Abstract: This paper develops a new hedonic method for constructing a real estate price index that utilizes all transaction price information that encompasses both single-sale and repeat-sale properties. The new method is less prone to specification errors than standard hedonic methods and uses all available data. Like the Case-Shiller repeat-sales method, the new method has the advantage of being computationally efficient. In an empirical analysis of the methodology, we fit the model to all transaction prices for private residential property holdings in Singapore between Q1 1995 and Q2 2014, covering several periods of major price fluctuation and changes in government macroprudential policy. Two new indices are created, one from all transaction prices and one from single-sales prices. The indices are compared with the S&P/Case-Shiller index. The result shows that the new indices slightly outperform the S&P/Case-Shiller index in predicting the price of single-sales homes out-of-sample. However, they underperform the S&P/Case-Shiller index in predicting the price of repeat-sales homes out-of-sample. The empirical findings indicate that specification bias can be more substantial than the sample selection bias when constructing a real estate price index. In a further empirical application, the recursive method of Phillips, Shi and Yu (2014) is used to detect explosive periods in real estate prices of Singapore. The results confirm the existence of an explosive period from Q4 2006 to Q1 2008. No explosive period is found after 2009, suggesting that the ten successive rounds of cooling measures implemented by the Singapore government have been effective in changing price dynamics and preventing a subsequent outbreak of explosive behavior in the Singapore real estate market.
    Keywords: Repeat sales, Hedonic models, Prediction, Index, Explosive, Cooling measures
    JEL: C58 R31
    Date: 2014–12
  20. By: David Dapice; Tom Vallely
    Abstract: Despite the encouraging developments of the past two years, Myanmar faces an uncertain future fraught with very difficult political, economic and challenges. This paper examines where Myanmar has been, where it is, and what kinds of changes are needed to create conditions for unity, peace and inclusive and sustainable development. While the analysis in this paper is cautionary and often negative, its purpose is to solve problems, not complain. Creating a coalition for nation building will be easier if the poor current situation is better understood. Achieving the desired goals will not be easy and will likely take longer than many understand or imagine. Avoiding narrow coalitions that would continue current extractive policies is necessary to move forward. However, a feasible path exists and many current government policies are meant to put the nation on that path.This paper aims to contribute to those efforts and build on the progress already made.
  21. By: David Dapice
    Abstract: Myanmar, long isolated from western economies due to its government, is one of the poorest and worst governed countries in the world. Ruled for many years by a reclusive dictator, senior general Than Shwe, it was dependent on China for diplomatic protection and arms. Trade and investment deals reflected its lack of alternatives. China's "One nation, two oceans" policy and Yunnan's "Bridgehead" strategy envisioned Myanmar providing access to the sea via gas and oil pipelines, deep sea ports, naval docking facilities and transport for Yunnan. Yunnan through its Southern Grid along with CPI (China Power International) saw Myanmar's Kachin state as providing ample hydroelectric supplies for the landlocked Chinese province. Deals were singed under General Than Shwe without popular review or consultation with the Kachin whose state had most of the hydroelectric sites.
  22. By: Bouguen, Adrien; Filmer, Deon; Macours, Karen; Naudeau, Sophie
    Abstract: Interventions targeting early childhood development, such as investment in preschools, are often seen as promising mechanisms to increase human capital and to reduce the intergenerational transmission of poverty and inequality. This paper presents results from a randomized evaluation of a large scale preschool construction program in Cambodia, and indicates a cautionary tale. The overall impact of the program on a wide set of children’s early childhood outcomes was small and not statistically significant, and for the cohort with highest exposure the program led to a negative impact on early childhood cognition. Moreover, for this group, the intervention increased inequality as the negative impacts are largest for children of poorer and less educated parents. The results can be explained by the frequent occurrence of underage enrollment in primary school in the absence of preschools, stricter enforcement of the minimum age for primary school entry after the intervention, substitution between primary and preschool following intervention, and difference in demand responses of more and less educated parents to the new preschools. These results indicate that the design of ECD interventions needs to start from a good understanding of parental and teacher decisions pre-program. More generally, they show how implementation and demand-side constraints might not only limit positive impacts, but could even lead to perverse effects of early childhood interventions.
    Keywords: early childhood development; preschools; RCT
    JEL: I28 O15
    Date: 2014–09
  23. By: Fuhai HONG (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological Univer- sity. Address: 14 Nanyang Drive, Singapore, 637332.)
    Abstract: This paper incorporates identity into a model of voluntary public good contribution. An ideal of contributing to public goods divides players to di¤erent social categories: Players who identify with the ideal become insiders, obtaining identity utility but incurring disu- tility if their contributions depart from the ideal, while players who do not identify with the ideal remain as outsiders. We show that identity could increase public good contribution; the ideal that best resolves the free-riding problem in the public good game equals either the contribution level of the most altruistic player in the absence of the identity, or a level that makes the least altruistic player indi¤erent between becoming an insider and not, depending on the size of the group. These results have implications for social policymaking.
    Keywords: Ideals, Identity, Public Goods, Social Categories
    JEL: D03 H41
    Date: 2014–11
  24. By: Tim Kelsall; Heng Seiha
    Abstract: Since 1960 many countries have experienced growth accelerations, but few have maintained growth. An adequate theory of growth must explain both how some countries kick-start growth, and how some maintain it over decades. For us, the key is to be found in the relationship between what we call the political settlement and the environment for business. Some political settlements create the possibility of a transition from disorder to order in the deals environment, and this creates a potential for accelerated growth. Of these, a smaller subset manages to maintain order while also permitting an increased openness of the deals environment, so that new firms can enter, innovate, compete, and structurally transform the economy. Over the past 40 years, Cambodia has had one of the world’s most volatile growth experiences. A prolonged economic collapse between 1970 and 1982 was followed by a gradual but unstable recovery up until 1998, while post-1998 saw another growth acceleration and sustained high growth. While growth collapse can be traced to the failure of Prince Sihanouk’s post-independence political settlement, war and the disastrous Khmer Rouge regime, growth acceleration and maintenance has been based on a political settlement which has created a balance between technocrats and rent-seekers within Hun Sen’s dominant coalition. Technocrats are given just enough latitude to support growth industries, while rent-seekers are given the political backing to generate profits, a proportion of which are funnelled to the masses through ruling party patronage projects. Through interviews conducted in four economic sectors, we show that there has been a positive feedback loop between support for competitive export industries, state capacity, and structural transformation. However, there has also been a negative feedback loop from over-reliance on high-rent industries, to insufficiently inclusive growth and political instability. The political settlement that has underpinned growth and stability for the past 15 years is facing a severe challenge.
    Date: 2014
  25. By: David Dapice
    Abstract: The purpose of this paper is to provide an assessment of the current socioeconomic conditions in Myanmar's Rahkine State and to evaluate the prospects of accelerating economic development as a way of reducing tensions between Muslim and Buddhist groups. There has been significant conflict in recent years which has continued sporadically into 2014, resulting in severe hardship for approximately 140,000 Muslim refugees and significant damage to the local economy. The tensions also weaken the country by presenting a challenge to a potential framework for federalism by undermining stability and thus the confidence of potential investors. They also risk drawing in Muslim extremists outside the country. Drawing on historical information and on conversations conducted with a variety of Rakhine (Buddhist) business, civil society, political and government people, this study reviews the demographic trends affecting the state to separate fact from fiction and sheds light on the impact of current policies on the state's potential for economic development. Areas for working toward reconciliation are explored, and options such as promoting shared stakes in local resources and governance are discussed.
  26. By: Peter C.B. Phillips (Cowles Foundation, Yale University); Ye Chen (Singapore Management University)
    Abstract: Chen and Deo (2009a) proposed procedures based on restricted maximum likelihood (REML) for estimation and inference in the context of predictive regression. Their method achieves bias reduction in both estimation and inference which assists in overcoming size distortion in predictive hypothesis testing. This paper provides extensions of the REML approach to more general cases which allow for drift in the predictive regressor and multiple regressors. It is shown that without modification the REML approach is seriously oversized and can have unit rejection probability in the limit under the null when the drift in the regressor is dominant. A limit theory for the modified REML test is given under a localized drift specification that accommodates predictors with varying degrees of persistence. The extension is useful in empirical work where predictors typically involve stochastic trends with drift and where there are multiple regressors. Simulations show that with these modifications, the good performance of the restricted likelihood ratio test (RLRT) is preserved and that RLRT outperforms other predictive tests in terms of size and power even when there is no drift in the regressor.
    Keywords: Localized drift, Predictive regression, Restricted likelihood ratio test, Size distortion
    JEL: C12 C13 C58
  27. By: Massimiliano Landi (Singapore Management University)
    Abstract: I provide a simple example of a quadratic utility function that generates a Giffen demand. The utility function is symmetric, increasing and concave. Interestingly, the Giffen effect arises in the subspace where the utility function is strictly increasing and strictly concave. A full characterization of the parameter conditions under which the Giffen demand arises is provided.
    Date: 2014–11
  28. By: Nikolas Tsakas (Singapore University of Technology and Design and Universidad Carlos III de Madrid)
    Abstract: We study the optimal targeting strategy of a planner who seeks to maximize the diffusion of an action in a society where agents imitate successful past behavior of others. The agents face individual decision problems under uncertainty and interact locally, so that each agent affects only his neighbors. We find that the optimal targeting strategy depends on two parameters: (i) the likelihood of the action being more successful than its alternative and (ii) the planner’s patience. More specifically, for an infinitely patient planner the optimal strategy is to concentrate all the targeted agents in one connected group when her preferred action has higher probability of being more successful than its alternative; whereas it is optimal to spread them across the population when this probability is lower. Interestingly, for an impatient planner the optimal targeting strategy is exactly the opposite.
    Keywords: Targeting, Diffusion, Imitation, Local Interactions.
    JEL: D83 D85 M37 O33
    Date: 2014–11

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